Asian Fund Flows: Back in the Black?

As Asia’s overall economy makes a marked shift back into positive territory, hedge fund managers are asking: ‘When will we feel the same swing?’  While the Asian economy has improved quicker than those of Europe or North America, Asian hedge funds have yet to attract the level of capital inflows seen before the global financial crisis. Considering the onset of increased liquidity in international capital markets, however, hedge fund managers appear optimistic that a continued suppression of international cash flows, particularly from US institutional clients, will only be temporary. 

There is certainly reason for optimism; the return of Foreign Direct Investment (FDI) has played a crucial role in the rapid economic revival of East Asian economies, despite fears that FDI flows would severely and permanently decline.  More importantly, despite the financial crisis, Asian economies have built on years of potential to emerge as amongst the world’s most exciting and strategically critical investment destinations.  This global mind shift has positioned Asian economies as the chief beneficiaries of the post-crisis turnaround, and hedge fund managers in Asia are ideally placed to reap these benefits; multiple hedge fund indices place China’s 2009 index at an overall 45% to 50% percent gain over 2008, with even higher gains predicted for 2010. Responding to this optimism, approximately 200 new funds are expected to launch this year, with around 80 per cent setting up shop in Hong Kong and Singapore, and the rest in Tokyo and Sydney.

While the hedge fund industry is certainly experiencing a rebound in the region, capital flows remain far from pre-recession levels. The continuation of this challenging environment is reflected in the size of new launches; no more than a handful will be multi-billion funds, and most will be in the USD 30 million range. Residual caution on the part of ‘new economy’ investors may also create a challenge for less experienced fund managers seeking to capitalise on the rebound. With the recent crisis fresh on their minds, foreign institutional investors are likely to prefer managers with a good track record in Asia, particularly those who successfully weathered the storm. As capital flows creep back, recruitment opportunities are thus likely to grow in smaller funds overseen by veteran Asian managers, with financial centres like Hong Kong and Singapore increasingly well-positioned to attract the best global talent.

With consultants and networks covering every major financial centre in Asia, ALS International recruits for many leading hedge funds throughout the region. For more information regarding current opportunities, please contact Anthony Lewis (a.lewis@alsrecruit.com, +852 2973 0826).